TOKYO. Feb 1: Japan’s politically sensitive Jobless rate could rise sharply under planned legal revisions that would give companies far greater freedom to fire or transfer employees, labour lawyers say. reports Reuters.

Draft revisions to the Commercial Code, approved by a Justice Ministry advisory panel last month, would make It easier for companies to split themselves Into several spin-off firms and cut off badly performing divisions.

"Under the new law. many companies are expected to apply for split-ups as a means of restructuring." said Ichiro Natsume, spokesman for the Labour Lawyers' Association of Japan. The new spin-off system would be a loophole for companies, and it is highly likely that Japan's unemployment rate would shoot up."

The changes Are being debated as Japanese firms — under huge pressure to restructure and alim down their operations after a decade of economic malaise — move away from traditional employment practices which put stability and loyalty first.

The government said on Tuesday that unemployment rose for the first time in six months in December, edging up 0.1 percentage point to 4.6 per cent. Economists expect the rate to head higher In the coming months, towards the record high of 4.9 per cent hit last summer.

Under the legal revisions, a company could split itself into several new firms, with the new units taking over the original company's business and assets. But what happens to the employees remains an open question.

The revisions could water down strict conditions now imposed on companies firing workers In a restructuring.

A company could dismiss its entire workforce then re-hire them at lower salaries or demote full-time workers to part-time status, the labour lawyers' group says.

"This contains the danger of fundamentally destroying Japanese workers' and labour unions' rights." the group said in a statement.

The lawyers want the government to establish a new labour law to secure employment In cases where companies split up, or at least ensure that labour agreements are honoured by spin-off firms.

In response, a Labour Ministry council Is discussing the issue, seeking to compile a draft report early tills month.

One member predicted the panel would agree on present labour-management agreements being applied to spln-oiTs. but he doubted there would be agreement on a new labour law to protect workers at firms that have no labour-management agreements.

Even if companies don't slash Jobs, opponents of the reforms argue, management — now required to honour labour

agreements even during a corporate insolvency — might take the chance to bypass existing protection for workers during corporate restructuring.

The draft revision does not mention whether management would be bound by existing agreements on worker rights.

The Japan Federation of Employers Association. Nikkeiren. has welcomed the legal changes as a means to facilitate corporate restructuring. But Katsujlro Yanagi, In charge of labour issues for Nikkeiren, said he could not comment on how workers' rights would fare as this was still under discussion.

Econoi lists, many of whom have long argued that Japan's restrictive labour laws impede the kind ol corporate restructuring needed to ensure a durable recovery, see mixed results from the proposed changes.

Hishashl Yamada. an economist at Japan Research Institute, said he did not expect the Jobless rate to soar as a result'because only big companies will take advantage of the split-up provisions and because strict Judicial precedents will restrain firms.

But Yamada agreed with the labour lawyers that spin-offs could prompt companies to cut wage and benefit costs as well as hitting consumer confidence. "In the short-term, concerns over being fired or having a lower income will be negative factors for consumption." he